Correlation Between Globaltek Fabrication and Information Technology

Can any of the company-specific risk be diversified away by investing in both Globaltek Fabrication and Information Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Globaltek Fabrication and Information Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Globaltek Fabrication Co and Information Technology Total, you can compare the effects of market volatilities on Globaltek Fabrication and Information Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Globaltek Fabrication with a short position of Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globaltek Fabrication and Information Technology.

Diversification Opportunities for Globaltek Fabrication and Information Technology

-0.55

Correlation Coefficient

Globaltek Fabrication  Information Technology

Excellent diversification

The 3 months correlation between Globaltek and Information is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Globaltek Fabrication Co and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology and Globaltek Fabrication is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Globaltek Fabrication Co are associated (or correlated) with Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Globaltek Fabrication i.e., Globaltek Fabrication and Information Technology go up and down completely randomly.

Pair Corralation between Globaltek Fabrication and Information Technology

Assuming the 90 days trading horizon Globaltek Fabrication Co is expected to under-perform the Information Technology. In addition to that, Globaltek Fabrication is 1.09 times more volatile than Information Technology Total. It trades about -0.12 of its total potential returns per unit of risk. Information Technology Total is currently generating about 0.08 per unit of volatility. If you would invest  4,280  in Information Technology Total on September 15, 2024 and sell it today you would earn a total of  405.00  from holding Information Technology Total or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Globaltek Fabrication Co  vs.  Information Technology Total

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Information Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Globaltek Fabrication and Information Technology

The main advantage of trading using opposite Globaltek Fabrication and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globaltek Fabrication position performs unexpectedly, Information Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Information Technology will offset losses from the drop in Information Technology's long position.

The idea behind Globaltek Fabrication Co and Information Technology Total pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.